In the competitive cheeseburger industry, workers at McDowell’s threaten to go on strike. To avoid the...

In the competitive cheeseburger industry, workers at McDowell’s threaten to go on

strike. To avoid the strike, McDowell’s agrees to pay its workers more. At other fast

food restaurants, wages remain the same.

a) In a diagram, illustrate what happens to McDowell’s marginal cost curve.

In the same diagram, draw the marginal revenue curve.

b) What happens to the number of cheeseburgers that McDowell’s makes?

c) More workers will want to work at McDowell’s after the wage hike. Will more

workers actually be able to work at McDowell’s? Why or why not?

Expert Solution

(a)

In following diagram, MC0 and MR are initial marginal cost and marginal revenue curves. An increase in wage rate will increase the marginal cost of production, shifting MC curve upward from MC0 to MC1 as shown below. Since the industry is competitive, MR is horizontal at the level of market price P0.

(b) Since a competitive firm maximizes profit by equating MR (Price) with MC, initial equilibrium was at point A with output q0. After wage hike, new equilibrium is at point B with lower output q1. Number of cheeseburgers will fall.

(c) Since higher wage rate will increase the cost of production, McDowells will decrease production and lower its demand for labor. Therefore, more workers will not be able to get work there at higher wage, and some of the existing workers will be laid off because of higher wage rate, causing unemployment.

Rahul Sunny answered 2 years ago

Unions might increase efficiency in the case where they a. threaten a strike but don't actually...

Unions might increase efficiency in the case where they a. threaten a strike but don't actually follow through, so there are no lost hours of work. b. lower the wage of local outsiders. c. offset the market power of a large firm in a "company town." d. raise the wage for insiders above the competitive equilibrium.

Suppose that: (i) the construction industry is perfectly competitive; (ii) male and female construction workers are...

Suppose that: (i) the construction industry is perfectly competitive; (ii) male and female construction workers are equally productive; and (iii) all male construction workers are prejudiced against female construction workers. In the equilibrium in the labor market for construction workers, one would expect: Group of answer choices Integrated work crews, and no gender wage gap disadvantaging women Integrated work crews, but a gender wage gap disadvantaging women Work crews that are segregated by sex, but no gender wage gap Work...

Consider whether the US farming industry is perfectly competitive. Go to the US Department of Agriculture's...

Consider whether the US farming industry is perfectly competitive. Go to the US Department of Agriculture's Economic Research Service website, click "Farm Income," and consider the information in the articles on family farms. Does farming in the US have the characteristics of perfect competition? Please Type Answer do not hand write . Thank you.

How do the tradeoffs, things that Trader Joe’s does not do, threaten or advance its competitive...

How do the tradeoffs, things that Trader Joe’s does not do, threaten or advance its competitive advantage? Consider the value chain and its integrated parts as you answer the question.

compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient...

compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient because thery a. do not lower the product price if put prices fall b. waste resources by producing an excess amount of output c. restrict their output levels to maximiz profirs d make economic profits in the long run. which of the following statement is true about a firm in a perfectly competitive market a. the demand for its product is a downward sloping...

The workers effectively shut down UPS during the strike. Without the workers, UPS simply could not...

The workers effectively shut down UPS during the strike. Without the workers, UPS simply could not do business. This illustrates which contingency of power?

An industry hires 30 workers when the wage is $20. It raises the number of workers...

An industry hires 30 workers when the wage is $20. It raises the number of workers hired to 56 when the wages fall to $10. What is the short-run elasticity of labor demand? Is the demand elastic or inelastic?

MY QUESTION IS SUMMARIZE ACCURATELY PLEASE AVOID SUMMARIZING TOOL, Analyzing your industry In every industry, no...

MY QUESTION IS SUMMARIZE ACCURATELY PLEASE AVOID SUMMARIZING TOOL, Analyzing your industry In every industry, no matter what product or service it provides, there are five basic forces of competition. Taken together they determine the industry's attractiveness and its long-term profitability. First, and maybe most obvious, is the character of the rivalry among the competitors. Competition can be gentlemanly and subdued, or it can be vicious and warlike. If competition in your industry is like a guerrilla war, if someone...

What is the difference between a monopoly industry and a competitive petroleum industry in terms of...

What is the difference between a monopoly industry and a competitive petroleum industry in terms of output and price in a static and dynamic sense?

Workers in several industries were surveyed to determine the proportion of workers who feel their industry...

Workers in several industries were surveyed to determine the proportion of workers who feel their industry is understaffed. In the government sector, 37% of the respondents said they were understaffed, in the health care sector 33% said they were understaffed and in the education sector 28% said they were understaffed (USA Today, January 11, 2010). Suppose that 200 workers were surveyed in each industry. b) Assuming the same sample size will be used in each industry, how large would the...

Question